Crude oil crosses $98/barrel amid US-Iran tensions:Crude surges 4%, Qatar LNG supply likely to be stuck till October

Due to increasing tensions between America and Iran, crude oil prices in the global market have once again surged. Brent Crude Oil has risen 4% today, crossing $98 per barrel, which is the highest level in the last 6 weeks. Meanwhile, American Crude has also reached close to $89.50 per barrel. Rising crude oil prices have increased inflation and energy crisis in India. This is likely to impact the Indian Rupee and Foreign Portfolio Investment (FPI) flows. On the other hand, expensive crude oil has put heavy pressure on the retail fuel margins of India’s oil marketing companies, resulting in a loss of ₹20.4 per liter on diesel for companies. How crude oil prices fluctuated after the Iran war Attack on oil tankers in Red Sea, Houthis announce blockade The major reason for this sudden surge in oil prices is the deteriorating situation in West Asia. With increasing tensions between America and Iran, this dispute has now spread to other parts of the Persian Gulf as well. According to media reports, Yemen’s Houthi rebels have attacked Saudi Arabia’s oil tankers in the Red Sea. This attack came just one day after the Houthi group announced a blockade on the Bab-al-Mandeb Strait, which has raised serious concerns over the global oil supply chain. Oil company shares fell by up to 2.5% The surge in crude oil prices has had a direct impact on India’s Oil Marketing Companies (OMCs) India imports approximately 85% of its crude oil requirement. When crude becomes expensive, the country’s import bill increases, which raises concerns of rising inflation and impact on companies’ margins. LNG supply likely to be disrupted till October According to a Bloomberg report, Qatar Energy is preparing to extend ‘force majeure’ on Liquefied Natural Gas (LNG) shipments until mid-October. Qatar had already informed some customers in Asia and Europe in June that August and September cargoes would be cancelled. If this restriction extends until October, it could deepen the global gas crisis before winter begins, as Europe and Asian countries will compete with each other for limited LNG supply. Petrol-Diesel prices increased in May In May, IOC, BPCL and HPCL had increased prices of both petrol and diesel by ₹7.50-₹7.50 per litre in instalments, citing expensive international crude prices. These three government companies control more than 90% of the country’s over 1 lakh petrol pumps. What’s Next? If this deadlock in West Asia continues for long, crude oil prices could cross the $100 per barrel mark. This could lead to continued volatility in the Indian stock market in the coming days, especially in shares of banking, auto and paint companies.